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May/June 2009 | Volume 1/Number 3
Cover Story

Speaking With Tellabs CEO, Rob Pullen

By Greg Galitzine, Group Editorial Director

Rob Pullen believes in doing what it takes to allow others to achieve success. And he wants to position Tellabs as the premiere organization that can help customers succeed. By outfitting Tellabs’ customers to achieve their goals, Pullen further believes that his firm enriches people’s lives by innovating the way the world connects.

Tellabs supports service providers and operators around the globe with solutions ranging from mobile backhaul, to third- and fourth-generation wireless solutions (3G, 4G), to dynamic optical networking, as well as a professional services group that engineers, designs, and supports networks for a wide range of operators including Verizon, BellSouth, NTT Communications of Japan, Telstra of Australia, Telkom South Africa and Telecom Italia.

NGN Magazine recently had the opportunity to meet with Pullen, Tellabs’ President and CEO to discuss some of the trends that are impacting the industry. Pullen joined Tellabs as an electrical engineer and has steadily progressed through the corporate ranks, enjoying stints in research and development, sales and marketing, culminating with his taking the reins of the organization just over a year ago.

For most people, taking the reins of a manufacturing firm making its way in the telecom market would be a challenge at any time, much less at a time when the economy was experiencing its worst climate in recent history. Still Pullen maintains an optimistic tenor and is proud that Tellabs has continued to increase its margins, expanding from 34 to 42 percent recently. And he adds, "We’re generating cash," which in this economic environment is a result others might wish to emulate.

According to Pullen, he saw the market turmoil approaching, but he had no idea when or how deep the downturn would be.

"That certainly surprised me," said Pullen, "and as you can imagine, like everyone else, our revenues were slightly affected downward. And so in this tough economic time, we need to look around and say, ‘we’re going to invest our way through this, we’re going to emerge stronger on the remote end, but we’re going to manage our cash flow and profitability along the way,’ that is, things that are in our control. I can’t control when the macroeconomic market’s going to improve, but I can control how we manage our expenses, improve our profitability, and keep close to customers." The relationship with Tellabs’ customers is of course critical in Pullen’s view. "We are our customer’s trusted partner, and the operative word there is ‘trusted.’ I’m not going to compete on the lowest cost, even though we’re concerned about cost, and we’re taking costs out of our business. Customers trust us to help them architect, design, and optimize their networks. They don’t let you do that unless you have intellect to bring along with it, and you’re showing a real value add."

Regarding the macroeconomic situation, Pullen believes that most telecom manufacturers and operators should come through this slump — particularly if they have little or no debt — because the previous telecom downturn toughened them up, and prepared them to run leaner, more efficient organizations. Pullen referred to a recent conversation he’d had with several other industry leaders, who opined that this economy was the worst thing they’d seen.

He responded that, "2001 toughened me up so much, and while this is difficult, it’s not half as bad as it was then. I’m actually more optimistic about the future. What we’re finding is customers — the leaders — are using IP communications to either generate more revenue, or they’re using it to save money. And this is a time when you need both of those desperately."

When we spoke, Pullen was justifiably proud of the fact that Tellabs had over $1billion in cash and cash equivalents and carried no debt. Tellabs has been investing in areas they believe will grow, for example emerging economies like Brazil. They’ve also announced several recent wins including a deployment with BT as part of that operator’s 21CN (21st Century network) initiative.

As an engineer, it’s no surprise that innovation drives Pullen’s vision for the company. And he sees tremendous opportunity for application development as the focus shifts from hardware platforms to software-based application creation environments.

In fact, he told us that Tellabs is moving in that direction. "We’ll make a hardware platform, (IP, Ethernet, etc…) that if you thought about it five years ago, you would have said, ‘Well, it’s got a data plane and a control plane to it.’ But we’re now moving to the next level, which is, it’s got to have both those planes to it, as well as an application and content enabling plane, to offer personalization, to offer policy and subscriber management, to enable multimedia encryption, storage caching and so on."

"The biggest fear of the service provider, and what Wall Street thinks about them," Pullen added, "is that they’re going to deliver pipes with no value add, and that goes back to the questions of ‘how do I offer intelligence, personalization, differentiation versus someone else?’ It’s all going to be based on content, on personalization, on policy and subscriber management."

We asked Pullen to share his thoughts regarding whether it’s consumers themselves that are really driving, for example, the need to have video on a mobile device.

"I believe it’s both business and consumer," Pullen said. "Let’s take the following example. There’s a device that’s been invented at UCLA, a prototype where they’re doing blood testing and water testing using their cell phone. They’re routing it back to labs for real-time diagnostics, for real-time diagnostics. That’s a perfect scenario where you want to go test the water in an emerging country where you’re not sure. You want to have a test your blood for diabetes for your blood of some sort. They’re using a mobile device for that."

"And, I think we’re only at the tip of the iceberg," he continued. "Look at mobile commerce. Service providers in Kenya, for example, are acting as the bank. They’re allowing transactions on the mobile device, the service provider is acting as a banking system, taking a cut of the transaction as a small profit to, you know, for the administration and profit."

In the end, Tellabs’ mission is to enable their service provider customers to enhance the lives of their subscribers. According to Pullen, the goal is to "speed commerce."

"All we’re doing is speeding commerce in the world, whether it’s consumer-to- consumer or business-to-business, or consumer-to-business," he explained. "In the early days, it was done via water. Then it was done via roads. Then it was done railroads, transportation, air travel. Now it’s done via the ‘net. What’s the next generation to the ‘net? It’s this personalization and customization. But it all is along the lines of speeding commerce, in my opinion."

"Of course, if my children were here, they’d say it’s also about entertainment, too. Gaming, TV, movies… and that’s all part of it. But it also varies by culture. We recently completed a study with Nielsen where we found that by country, people looked at their mobile devices differently. So Americans look at their phone, and they kind of think about work first. In Italy, they look at their phone and they think about their friends. In France, they look at their phone and they think about entertainment. So really, there are some insights that that survey had about how you use the phone, and it varies by culture. It’s the same object, but it has different purpose in your mind."

Pullen believes that as a core principle, a key to Tellabs’ success has been the ability to focus. He explained that he recently addressed the company’s employees, and shared his experience, that over 24 years with Tellabs, "When Tellabs focuses, we win. You know, if we try and become everything to anyone, you lose. There are too many things going on in this industry at the same time to have one company do it all really, really well."

And it all comes back to a commitment to the customer. Discussing the various trends that will propel his company forward, Pullen said, "I think the most important one is we’re highly aligned with customers. We’re helping them to innovate to make them successful, make them money or save them money. We’re focused on these growth areas, and we’re going to compete on innovation while still pursuing process excellence, and customer satisfaction as good as — or better than — our competition. And we’re going to pursue flawless execution."

Update (April 28, 2009):

The day this issue went to print, Tellabs announced first-quarter 2009 revenue, which showed that the company earned $7 million or 2 cents per share, which compares with earnings of $17 million or 4 cents per share one year ago.

In this economy that was not entirely unexpected. The fact that Tellabs was able to announce a smaller-than-expected drop in quarterly earnings due to cost cuts, helped shares of the company’s stock rise 7 percent following the news.

One key takeaway that had analysts impressed was the rise in Tellabs’ gross profit margin to 44.2 percent from 38.3 percent a year earlier.

The company ended the quarter with $1.18 billion in cash, cash equivalents and marketable securities, which prompted Morgan Keegan & Co (News - Alert) analyst Simon Leopold to say, "I think having a phenomenal balance sheet with $1.2 billion in cash, and no debt, provides options."

NGN Magazine Table of Contents

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